Last year, Nestle’s steady-as-a-rock approach produced a strong set of full-year results. This year, as it unveils another set of impressive results, it seems its real strength is its consistency. With more of the same due for 2003, there will be no let up for those chasing the global leader.
Nestle has achieved a 13% rise in full-year net profits to US$5.9 billion and a 5% organic growth in sales. This is remarkably strong and consistent growth for a company that is already the world’s biggest consumer food and drinks producer.
In 2001, Nestle beat its real internal growth target of 4% by 0.4%. At the time, analysts heaped praise on the company’s performance and said it would be hard to beat in 2002. Sure enough, the company fell just short of the 4% target in 2002, achieving growth of 3.4%. But even though the less optimistic predictions were born out, Nestle’s 2002 performance was still far from mediocre, especially given the current global economic downturn.
Earnings were helped by disposals and the IPO of its eyecare unit Alcon, but Nestle’s real strengths are as a model of steady, well-managed growth, balanced international development, a focus on brands that deliver value growth and a consistent commitment to meeting the latest consumer trends.
The fact is that Nestle has added value to its proposition through consumer-led innovation, rather than getting caught in the trap of continually offering lower priced products. The wisdom of that strategy is reflected in a 5% growth in organic sales, of which 1.5% was due to price growth.
Nestle’s extensive international reach has also enabled it to soak up growth in emerging markets, notably in the heavyweight markets of Russia and China – although less well in Mexico and Argentina.
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At least Nestle’s competitors can breathe a slight sigh of relief that the company’s hunger for acquisitions appears to have eased – that is, as soon as it has added US ice cream maker Dreyer’s to its portfolio. Nestle is clearly aiming for a continuation of its past performance in 2003, so there will be no respite for its competitors.
Related research: Datamonitor, “Everyday Treating” (DMCM0086)
